If you’d like a good case of sticker shock, just take a look at your latest freight bills.
The bad news is that many of the circumstances that lead to these hefty charges (including sky-high fuel prices, an ongoing driver shortage and pandemic-related port congestion) are beyond the average shipper’s control.
The good news is there are still several ways your company can cut or contain costs in other parts of your logistics operations– including the seven time-tested tactics you’ll find below.
Modal Shifts
Where You Might Be Spending Too Much: Over the past two decades, customers’ desires for smaller, more frequent deliveries have increased many companies’ reliance on LTL, one of the most expensive modes of ground transportation.
What You Can Do About It: Talk to your customers about switching to slightly larger shipments that are delivered less often or consider teaming up with another shipper who’s delivering to those same customers so that your two companies can combine shipments. Either one should enable you to build bigger loads that can travel via full truckload.
Employing Partial Truckloads
Where You Might Be Spending Too Much: It’s easy to assume that truckload shipments are only viable for your company if you can completely fill a trailer every time, but sometimes it’s still less expensive to ship your goods via a partially filled truck instead of LTL.
What You Can Do About It: Ask your logistics engineering team or 3PL to run some optimizations to help you determine if using partial truckloads might make sense for you. Although these transits won’t cut your costs as effectively as the use of fully cubed truckloads, there are many times when they’re still the most economical route.
Reducing Dimensional/Weight Upcharges (LTL and Parcel)
Where You Might Be Spending Too Much: Carriers won’t hesitate to hit your company with a hefty upcharge anytime you supposedly fail to provide the correct dimensional information/weight classification for a shipment (“supposedly” is the operative word.)
What You Can Do About It: Meticulously collect and document the freight dimensions, weight and density for every one of your shipments. That way when a carrier does erroneously charge you a re-class fee, you’ll have your own records and dimensions to fall back on – and more of a leg to stand on when it comes to refuting that charge and protecting your bottom line.
Better Freight Classification
Where You Might Be Spending Too Much: The rate differences between the 18 different NMFC freight classifications can be significant, while the differences that place a product or package in one category instead of another can be infinitesimal. Unless your company is using the correct ones for all of its products, you could inadvertently be paying for a lot of higher-priced classifications when lower-priced ones will suffice.
What You Can Do About It: Take a few days to re-examine how your freight is being classified, especially if you’ve added a lot of new products, changed your product configurations, or altered some of your product packaging – or if you’ve recently acquired or merged with another company.
Bigger DC Networks
Where You Might Be Spending Too Much: Small DC networks are great for reducing some real estate and logistics expenses, but they usually have the opposite effect on your freight bills, which are typically the biggest component of a logistics program’s expense.
What You Can Do About It: Consider adding one or more DCs. It could help you minimize many of the high-mileage, high-zone moves that trigger some of the largest freight charges. However, take the time to run a warehouse network optimization first in order to confirm that the potential transportation savings will truly outweigh the additional inventory carrying cost.
Better Negotiating Power
Where You Might Be Spending Too Much: Shipping volumes matter more than carriers would like to admit. If you’re a small to medium-sized company, it’s highly likely that you’re not receiving the same carrier discounts or concessions as larger-sized companies.
What You Can Do About It: Align yourself with a 3PL that has a high aggregate shipping spend and let it negotiate on your company’s behalf. In most cases you’ll wind up with far better rates as well as lower accessorial charges.
More Vigilant Freight Auditing
Where You Might Be Spending Too Much: Anecdotal evidence suggests that as many as 20% of carrier invoices contain some sort of billing error and we’re not talking about errors that work in your company’s favor.
What You Can Do About It: Try to audit every invoice, every time. Many 3PLs like ours offer help with this function – and attractive gainsharing arrangements that only kick in if savings are actually uncovered.
The Bottom Line
There are many more suggestions we could add to this story – including increasing your use of intermodal transportation, improving your trailer cubing, taking advantage of DC bypass and of course using predictive analytics.
However, time and space don’t permit us to explore them all.
Needless to say that even though it is clearly a carriers’ market, you’re still in charge and in control of many aspects of your transportation spend.
Just as important, all of us at AFS are here to help with a wide range of services from LTL cost management and OS&D to freight forwarding and network design.
If you’d like to discuss the possibilities, let’s talk.
